Frontier Communications Corporation ( NASDAQ:FTR ) shareholders should be happy to see the share price up 16% in the last month. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 97% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The real question is whether the business can leave its past behind and improve itself over the years ahead.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Because Frontier Communications is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Frontier Communications saw its revenue increase by 17% per year. That's better than most loss-making companies. So on the face of it we're really surprised to see the share price has averaged a fall of 51% each year, in the same time period. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Frontier Communications is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Frontier Communications stock, you should check out this free report showing analyst consensus estimates for future profits .
A Different Perspective
Investors in Frontier Communications had a tough year, with a total loss of 70%, against a market gain of about 9.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 47% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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